In recent years, Indonesia had changed their regulations especially relating to business movement to give foreign investors an easier way to produce their activities in Indonesia. There are several steps that a foreigner should know in order to Establish a Foreign Investment Company (PMA Company) in Indonesia, that is:
1. Foreign Ownership Checking
Under Indonesian laws, not all businesses can be pursued or undertaken through foreign investment. There are certain lines of business that are open for foreign investment (up to 100% foreign-owned). While, the others may be prohibited for foreign ownership or subject certain limitation on foreign ownership (based on negative list of investment). For instance, maximum foreign ownership in a plantation company having an area of minimum 25 Ha is limited to 95%. The foreign ownership percentage is dictated by the line of business activities to be undertaken by the foreign investment.
2. Number of Shareholders and Minimum Capital
The Indonesian Investment Law provides that a PMA company shall be in the form of an Indonesian limited liability company. The Indonesian Company Law requires that an Indonesian limited liability company must at least have two shareholders. The shareholders may be two individuals, two legal entities or a combination thereof.
The minimum investment amount (paid up capital) shall be in the amount of IDR2,500,000,000 (or around USD250,000). The authorized capital of the company shall be maximum 4 times of the issued and paid-up capital. The minimum authorized capital of a PMA company shall be IDR10,000,000,000 (or around USD1,000,000).
The paid up capital shall be divided into numbers of shares. There is no particular regulation governing the nominal value per share. The nominal is to be determined by the shareholders. It can be Rp1,000 or Rp1 million per share.
3. Proposed Name Check
Firstly you need to propose a name for the PMA Company to be established. We then will assist you to check whether the proposed named has been occupied by another company. If the proposed name has been reserved by other party then you should propose another name.
The name check will take about 1-2 business days.
4. Board of Directors and Board of Commissioners
The proposed PMA Company should have at least one director and one commissioner. Certain line of business may require additional number of director and commissioner, for instance, a bank should have at least three directors and three commissioners.
The director shall assume the management role. Meanwhile, the commissioner shall supervise the management of the company by the director. Therefore, the director and the commissioner cannot be the same person.
Although it is not a requirement under the law, but for the practical purposes one of the directors must be a president director.
For the purpose of the deed of establishment, it needs the directors and the commissioners’ identity card (KTP/Passport) and their copy of Tax Registration Number (NPWP).
5. BKPM process
The founding of PMA Company applies the principle license to Investment Coordinating Board (BKPM) (permits in order to starting a business). An application of principle license can be submitted BKPM before or after the signing of Deed of Establishment. For an application which covers more than 1 business sector in which one of them includes manufacturing, separate Principle Licenses will be issued.
The timeline for implementing the investment plan set out in the principle license is 3 years, except for a particular business that requires a longer period. Extensions may be given if the period lapses, subject to procedures set out in BKPM Regulation.
The application of principle is in a standard form and must be duly filled in and submitted together with the following documents:
a. For foreign parties shareholders:
- certified true copy of the articles of association of the company (in English or Bahasa Indonesia version translated by a sworn translator) for foreign companies;
- copy of a valid passport for foreign individual;
- power of attorney (PoA) for the submission of the application to BKPM, The PoA shall be executed before a public notary and it has to be legalized by the Indonesia embassy;
- board resolution of all participant for approving the establishment of PMA Company and authorizing an authorized director to sign the POAs.
b. While for Indonesian shareholders:
- if a company, the certified true copies of deed of establishment, articles of association of the company, its changes also the approval or notice of Minister of Justice and Human Rights upon it and its Tax Payer Identification Number (NPWP);
- If individual, its need certified true copies of: (i) Identity Card (KTP) and his NPWP.
c. Description of Activity Plan:
- For Industry Sector, in the form of flow chart production completed by a detailed description of the raw material and its production process;
- For Service Sector, a description of the activities to be carried along with the description of services products that produced.
d. Recommendation of the Ministries / agencies of the field of the business if required.
It will take about 2 – 4 weeks to get the BKPM approval on the proposed investment provided that all required documents have been completely submitted.
6. Signing of Deed of Establishment
The founding shareholders shall sign a deed of establishment before a public notary in Indonesia following the issuance of BKPM approval. By granting our firm a power of attorney, the signing of the deed of establishment can be done by us on behalf of the founding shareholders.
The notary will need 3 – 7 days to issue official copy of the deed of establishment.
The deed of establishment shall be further submitted to the Minister of Laws and Human Rights (“MOL”) for its approval. The proposed company shall gain its status as a legal entity upon the issuance of the MOL approval.
Before the MOL issues its approval, there are some documents to be procured. Please see the following details.
7. Local Authorities Process
Before the MOL approval can be issued, there are some local licenses to be obtained:
a. Company Domicile Certificate
Following the execution of the deed of establishment, the company shall apply for and obtain a Company Domicile Certificate (Surat Keterangan Domisili Perusahaan or SKDP) issued by the head of the village/area where the PMA Company will be domiciled. Therefore, you need to determine where the new company’s office will be located.
Please note that in order to apply for a Company Domicile Certificate, the PMA Company needs to lease an office space. If the office space is located in an office building then the company shall get a confirmation letter from building management. This process will take about 3-7 days.
b. Tax Identification Number
The proposed PMA Company shall then apply for a Tax Identification Number (Nomor Pokok Wajib Pajak or NPWP) to the Directorate General of Tax. The application can be submitted after the company has obtained the Company Domicile Certificate.
The NPWP will be issued in 2 – 5 business days after the submission of the application provided that all required documents have been submitted.
8. Opening a bank account
The next step is that the company shall open a bank account at either local bank or offshore bank.
The purpose of setting up the bank account is that the founders should pay the capital injection into this bank account. The company shall obtain a bank statement confirming that the proposed capital has been remitted into the bank account.
9. The Ministries Approval
a. MOL Approval
The notary will submit deed of establishment and all the required documents to the MOL. Normally, it will take about 2 weeks – 2 months to get the MOL approval. The established company shall then be registered at the Corporate Registry (Daftar Perseroan).
After the Corporate Registry, the MOL will announce the deed of establishment in the Supplement to the State Gazette.
b. Registration to Ministry of Trade
The company has an obligation to obtain the Company Registration Certificate (Tanda Daftar Perusahaan or TDP) under Law No.3 of 1982. The registration will take approximately 2 – 4 weeks. TDP shall be valid for 5 years.
That’s it, I hope its useful.